Customer Lifetime Value (LTV) Calculator
Calculate customer lifetime value from average order value, purchase frequency, and customer lifespan.
Includes LTV to CAC ratio.
Customer Lifetime Value (LTV or CLV) is the total revenue a business can expect from a single customer over the entire duration of their relationship. It is one of the most important metrics in digital marketing because it directly determines how much you can afford to spend to acquire a new customer.
The core formula: LTV = Average Order Value × Purchase Frequency × Customer Lifespan
- Average Order Value (AOV): Total revenue ÷ number of orders (e.g., $85 per purchase)
- Purchase Frequency: Orders per customer per year (e.g., 4 times/year)
- Customer Lifespan: How many years a customer stays active (e.g., 3 years)
Worked example: A subscription box company has:
- AOV = $45
- Purchase Frequency = 12/year (monthly subscribers)
- Average customer stays 2.5 years
LTV = $45 × 12 × 2.5 = $1,350
The LTV:CAC ratio: LTV:CAC = LTV / Customer Acquisition Cost
This ratio tells you your marketing efficiency:
- Below 1:1 — you’re losing money on every customer
- 1:1 to 3:1 — barely sustainable; costs are too high
- 3:1 to 5:1 — healthy and profitable
- Above 5:1 — very strong; may indicate room to invest more in growth
Advanced version (with profit margin): LTV = AOV × Purchase Frequency × Lifespan × Gross Margin %
This gives a more accurate picture when margins vary. If gross margin is 60%: LTV = $45 × 12 × 2.5 × 0.60 = $810 in actual profit
Use LTV alongside churn rate — higher churn shortens customer lifespan and crushes LTV fast.